Washington DC payroll impacts

Hi, we are estimating the impact of payroll in all 50 states and Washington, DC using a labor income change and 2016 IMPLAN data. To verify and compare results, we look at impacts per $1MM of payroll in each state, in 2017 dollars. Most states have induced impacts of between 4-7 jobs and $150k-$300k of output per $1MM of labor income. Washington, DC's state model, however, shows only 1.4 jobs and $93k in output supported per $1MM of labor income.

Is this due to in-commuting and/or the small and un-diverse economy of DC? Do you have a recommended model for better estimating the impacts of payroll to employees in DC?

Comments

Thank you for your question. You are definitely on the right track. Let's break down the causes you've suggested.

Commuting:

To view the commuting data for your region, go to Explore > Social Accounts > IxC Social Accounting Matrix. If the Employee Compensation column makes a payment to the Domestic Trade row, then there is net in-commuting into the region (more income earned by workers who work in the area and live outside the area than vice-versa). The ratio of this value divided by the Employee Compensation column total gives you an estimate of the net in-commuting rate. If the cell is empty, then the region has net out-commuting, which will show up as a payment from the Domestic Trade column to the household rows. To get a net out-commuting rate, divide the sum of these payments (across the 9 HH types) by the sum of the household column totals.

I've done this, and yes, the 2016 DC data a very high net in-commuting rate, meaning many people work in DC but live outside of DC. (~$49.2Billion/~90.6Billion) = ~54.3%. If I compare this to a state like Virginia, I see there is net out-commuting (more people live in Virginia and work outside then the other way around). Knowing this region, many of the workers in-commuting and leaving DC to go home are the same Virginia residents in the Virginia data shown as out-commuters who work in DC. The labor income dollars spent by in-commuting DC employees in their home state actually generate impacts in that home state.

Region Size:

A smaller region does not always mean smaller impacts, but a smaller impact could suggest more of the purchases are made outside of the region. To get a sense of this effect, compare RPC's of this region to others. Read more about the effects of region size here.

One other follow-up- can you please explain more on how IMPLAN calculates the portion of income in-commuters spend in the study area? I see from this post that it assumed most of income to in-commuters is leaked.

That is correct. The way the model treats Employee Compensation is first it identifies the portion estimated to be payroll taxes and applies that to the Study Region. Regardless of where an employee lives, they pay payroll tax where they work. The remaining portion is consider "Household Income". The percentage of Household Income going to in-commuters (as defined by the SAM) is considered a leakage.

You probably noticed from the post you linked above that Multi-Regional Input-Output (MRIO) Analysis is commonly used in these types of analysis. You can find more information here.